Cloud Growth: Strategy, Not Cost-Cutting

Adoption of cloud and as-a-service computing models is accelerating in banking. While costs-savings may be the primary driver, increasingly the cloud is seen as a means of innovation and competitive advantage.

Cloud computing no longer can be considered an emerging technology or unproven platform. According to Gartner, this year the public cloud services market will grow 19.6 percent to total $109 billion worldwide. Business process services/business process as a service (BPaaS) are the largest segment, accounting for about 77 percent of the total market, while infrastructure as a service (IaaS) is the fastest-growing segment of the public cloud services market and is expected to grow 45.4 percent in 2012, Gartner reports.

Meanwhile, a survey conducted recently by the Open Data Center Alliance found that its members are advancing cloud adoption much faster than previously forecast, with more than half of responding members expecting to run more than 40 percent of their IT operations in the private cloud by 2015 and a quarter of members saying they will run more than 40 percent of their operations in the public cloud by that date.

These numbers indicate that many of the concerns executives in banking and other industries have had about cloud security and the ability to run enterprise and core systems in the cloud are being overcome – not only by the maturing of the technology, but because of the undeniable economic advantages of virtualization and hosted solutions. Now, a growing number of companies, including financial services firms are identifying strategic and competitive advantages in moving to the cloud – the focus of this special digital issue of Bank Systems & Technology.

Fujitsu recently surveyed bank CIOs in the UK about their top business priorities for the coming year. Among those top priorities is cloud computing. Sixty percent of the survey respondents said they believe it will help them meet their business strategies, and 64 percent said they think cloud computing is a key enabler of change within their organizations. Additionally, many of the respondents plan to deploy cloud-based systems to drive efficiency with core functions, in areas such as loan processing (77 percent of respondents), credit card processing (70 percent) and mortgage processing (64 percent), according to Fujitsu.

This transition from considering cloud/as-a-service adoption as mainly a cost-saving move to viewing the cloud as a driver of change, innovation and growth is reminiscent of how the approach to outsourcing has evolved over the years (as an aside, it could be said that cloud and hosted solutions are forms of outsourcing). At one time it was all about cost-savings, but banks and other users of outsourcing services recognized eventually that this is not enough. To be sustainable, outsourcing had to somehow become strategic – provide a competitive advantage, whether around excellent service, superior intellectual capital, speed to market or market insight.

So it is with cloud. The potential cost-savings not only are relatively “quick hit” – they actually can be hard to prove, not to mention sustain. The benefit comes in what cloud enables your organization to analyze, build and deliver.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio